7.

1 Financial Objectives
7.2 Initial Start-up Fund
7.3 Source of Funding
7.4 Sales and Expenditure Forecast
7.5 Estimation of Investment Attractiveness
7.6 Financial Statements
7.7 Break-even Analysis

7.1 Financial Objectives

A business worthy of an investment can be expected to produce positive net present value
(NPV) calculated at an appropriate cost of capital, internal rate of return (IRR) higher than the
required rate of return, and a payback period within a reasonable threshold. In this section, the
author specifies these objectives in bullet points. Other targets to be used as assumptions in the
projections (such as revenue growth, profit margins, etc.) may also be included.

1.1 Initial Start-up Fund

Table demonstrates the initial require start-up fund. All funding requirements must be
specified and briefly explained.
Table 7.1 – Start-up Fund
Source Amount

Source – Author (20xx)

1.2 Source of Funding

 This section describes the structure of firm’s source of funding (specifically name the
sources used, why they were chosen and how they will be applied). This may include such
sources and combinations of sources as:
 Joining forces with a fashion partner - If you don't have enough money to start your own
fashion business, then it may be worth considering finding someone else who's interested in
fashion and getting them on board as well - whether that means they're an investor or co-
owner of the fashion startup.
 Loans- Loans can be a good way to fund your fashion startup because it usually has lower
interest rates than other types of funding and you don't need collateral like with bank loans.
The downside is that there may be quite a few stipulations in order to get approved.
 Angel Investors- Startups and early-stage businesses that can be scaled for growth are
generally the most attractive angel investments. This means your business should be able
to increase its sales very quickly over the next few years without a huge increase in fixed

costs and expenses. Generally, angel investors are interested in high-growth, high-

potential startups that can earn them several times their original investment. Angel
investors have often accredited investors, which is a designation that requires a minimum
net worth of $1 million, at least $200,000 in annual individual income, or at least
$300,000 in annual joint income

 Self-funding (Bootstrapping)- Bootstrapping is a philosophy. Bootstrapping is about finding

a way to finance your business without relying on other people’s capital.  The most basic
bootstrapping idea is simply that of keeping a side job, as you start your brand. Keeping a
job can provide you with enough steady income to support yourself but it can also distract
you from your own projects, depriving you of the energies necessary to making it
happen.The truth is that it will probably take up to 5 years to get your company profitable,
and it’s unlikely that you are going to survive for so long if you don’t have some type of
financial support.

Table 7.2 – Sources and expected return for the capital amount
Source of fund Amount Percentage Expected return
Partner
Angel Investor
Banker
Self-funding
Source – Author (20xx)
What is weighted-average cost of capital (WACC) and how was it determined?

1.3 Sales and Expenditure Forecast

The Author is to present tables showing the forecasted sales, revenues, and expenditures.
The forecast period depends on the type of industry. The author must explain the assumptions for
each year’s financial information. Note that, the forecast may be affected by seasonal or product
life cycle factors, in which case the author should also describe the monthly breakdown.

Table 7.3 – 3 years Sale forecast

 Table 7.4 – 5 years sale forecast

Description Amount
Cost of goods sold / Cost of sales $ 685 million
Shelves and Racks $ 10,000
Display Cases $ 6,000
Mirrors $ 6,000
Mannequins $ 4,000
Cash Register $ 800
Store Inventory $ 2,000
Office equipment and furniture $ 1,500
Software $ 500
Insurance $ 1,500
Licenses and permits $ 750
Marketing promotion expenses $ 5,000
Contingency $ 3,500
Source – someka (2019)

1.4 Estimation of Investment Attractiveness

This section is to analyze the attractiveness of the business plan to investors by analyzing
the payback period, net present value (NPV) and internal rate of return (IRR) of the business
plan.

Payback period =
Net present value = 346,690
Internal rate of return = 90 %
* The discount rate used in the evaluation of NPV and IRR is the WACC estimated in Section
7.3. Source of Funds.
 1.5 Financial Statements

In this section the author is to demonstrate forecasted performance by providing projected

financial statements for the proposed business including income statement, and balance sheet.
Depending on the nature of the business being analyzed, a general recommendation is that these
statements should cover at least the first 5 years of the project life.

1.6 Break-even Analysis

Break-even analysis can help determine the viability of business being proposed. In order to
conduct this analysis, the author will have to categorize all the costs/expenses into fixed vs.
variable costs. The break-even points (in dollar and/or in units) can then be computed. This will,
in turn, allow for the margin of safety (comparison of forecasted sales or break-even sales in
dollar, units, or percentage) to be calculated. If the margin of safety is sufficiently large, it would
suggest the business is less likely to incur losses.
https://www.commbank.com.au/articles/business/business-financial-plan.html
https://www.scb.co.th/en/personal-banking/stories/pomelo.html
https://www.crunchbase.com/organization/pomelo/company_financials
https://www.investopedia.com/best-startup-business-loans-5112018#:~:text=Many%20consider%20the%20SBA%20loan,the
%20only%20path%20to%20success.
https://startupinthailand.com/how-to-obtain-financing-for-your-business-in-thailand/
Financial statements https://ivypanda.com/essays/fashion-clothing-companys-financial-statements/